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Property investment: 5 things to look out for when investing in property

While property, on paper at least, continues to be a solid investment strategy, there are key factors to consider before parting with your money.

And that's the main reason why it pays to take stock before jumping into an investment.

The amount of money at stake is up there with buying a home to live in and you wouldn't leap head first into buying a home for yourself, would you?

Here are some of the most important things to take into account before you invest in a UK property.

Property investment questions

Before committing to a buy-to-let property, ask yourself the following...

1. Have I done enough research into the area?

Incredibly, many investors pick an area of the UK to invest in based on rental yield alone.

This is a mistake and many other factors need to be considered beyond potential income.

The best way to find out the finer points of a particular postcode is to pick up the phone or pop in to see the local estate agent.

Tell the agent what you are looking to achieve and ask for suggestions on the type of properties that rent well in the local area.

There may be a high population of students in one particular postcode in which case purchasing a buy-to-let property suitable for a family could be a big mistake and end up costing you.

2. Have I compared enough data

The great thing about the internet is the amount of information available when it comes to property.

Of course, it's easy to look at the main property portals and see what else is up for sale in the area you are looking to invest.

But digger a little deeper is key when you recall how much money you're spending on your investment property!

Look at properties matching the type you are looking to invest in and see how long they are remaining on the market.

And look at sale prices of similar properties over the past six months to a year.

Consider, also, how many properties are available to rent in the area and how long have they been marketed for.

Speak to the local estate agent again, too, as they will have access to even more data across the local area.

3. Have I run my numbers and what are my financial aims?

As with any purchase involving hundreds of thousands of pounds, setting a budget and sticking to it is crucial.

And what that budget is will largely depend on your aims when it comes to your rental property.

Are you looking for a quick win in terms of income? If so, you should look for a property in an area with a high rental yield and keen demand.

If your financial aims are more long term, you should be looking for a property in an area where properties experience high capital growth.

Most importantly, what you spend will largely dictate what you achieve in both capital growth and yield, so never be tempted to go over budget to secure a property.

4. Is the layout of this property right for tenants?

So, you're viewing properties and one in particular looks to be a sound investment.

It will potentially produce a solid yield and is in an area of regeneration, with good transport links and high employment, so it should also grow steadily as a long-term investment.

Now, though, is the time to run the rule over the property itself.

Consider who your target rental market is. What will they be using the property for and will the layout work for them?

If the property's downstairs toilet is only accessible via the kitchen, for example, this dated layout could put off a lot of renters and cost you a pretty penny to amend.

5. Is being a landlord right for me?

While it's easy to focus on the potential financial rewards that investment property brings, being a landlord is not for everyone.

There will be key (and difficult) decisions to make throughout the journey and many, many bumps in the road when it comes to finances, void periods, troublesome tenants and market changes.

The best way to take the pressure off is to use a lettings agent's full management service, but that cost should always be factored into your overall budget.

How to invest in property

There are several different paths to property investment and which one is right for you will depend on your own personal circumstances and aims.

CJ Hole's beginner's guide to property investment can help, or pop into your local branch to talk through your investment options with one of our local experts.

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